Foreign exchange controls must go

THE CENTRAL BANK OF BARBADOS should start getting rid of the island’s foreign exchange controls – and stop being so dogmatic.
These suggestions have come from former Prime Minister and Minister of Finance Owen Arthur.
Arthur told BARBADOS BUSINESS AUTHORITY that the bank seemed to be holding on to the controls because of the thinking that they protected the exchange rate.
“I lived in Jamaica in the 1970s and [former prime minister Michael] Manley had exchange controls, but if you increase your deficits at an alarming rate and print money to finance them, there are no exchange controls that can help you,” he argued.
Exchange controls
“But what has been our reality? Every major new sector in Barbados that has been created has required the removal of exchange controls for their creation.”
“In order to get new investments here, you have to remove them, so you may just as well remove them.”
Arthur made the point that “having exchange controls would not help you maintain your exchange rate if you do other foolish things with the macroeconomy”.
The way he saw it, “the key is not to have these massive deficits that you finance by printing money”.
Arthur made the comments after addressing and fielding questions from members of the Barbados International Business Association (BIBA) at The Savannah Hotel on Tuesday.
He complained that the Central Bank had been “asserting itself too dogmatically” in the country’s business and financial affairs.
He said that the thinking of the Central Bank needed to relate to 21st century challenges.
“In England, at the time of the war with Napoleon, they had a post called the bell-ringer,” he recalled. “A man was to stand on the Cliffs of Dover and ring a bell if Napoleon’s army approached.
“That post was abolished in 1945 and the point which I am making is this: that bureaucracies develop and they hold on to purposes long after any justification exists for their survival.”
Arthur went on: “The Exchange Control Act says that the Minister of Finance is the exchange control authority but he devolves responsibility to the Central Bank.
“So the Central Bank has created a bureaucracy to deal with the devolved authority long after any justification for it exists.
“All of our major investments require the removal of exchange controls, so we may just as well remove them in the law.”
Arthur, who was minister of finance from 1994 to 2008, said his government had “gradually phased [controls] down”.
“Apart from Belize, we are the only entity in the Caribbean that has maintained exchange controls,” he complained. (TY)